France Fintech has posted a report on the Fench real estate crowdfunding sector, sharing a significant decline in this sector of online capital formation.
According to the research completed in partnership with Forvis Mazars, for the second year in a row real estate crowdfunding has declined. The most recent number shows a drop of 25.8% compared to the overall decline of crowdfunding at 17.1%.
In 2022, real estate crowdfunding dominated online capital formation at 68.2% of the overall market. This declined to 55.6% in 2023 and now has dropped below 50% as the sector has contracted.
The number of projects listed has also retreated in 2024, as there were 1139 projects listed compared to the high point of 1628 in 2022.
The majority of projects are for residential developments, but the share is said to be declining as well. Residential accounted for 77% of projects in 2023. In 2024, the percentage dropped to 49%.
There were 642 real estate projects that were repaid in 202,4, totaling €571 million euros, with an average rate of return of around 10.6%.
Real estate offerings experienced increasing delays in repayments in 2023, a challenge that has continued in 2024.
The report states that 15 to 20% of projects are experiencing delays of more than 6 months. Overall losses are said to be around 4% to 6%.
To quote the report:
As for the new flow of projects, we note that the platforms have further tightened their approval criteria (high pre-marketing rate, increased requirements for financial health, preference for operations without work or with minor renovation work, even lower LTV1, etc.) and are almost systematically taking guarantees from project leaders (first-ranking mortgages, trusts, etc.). Less than one project in 10 is put online on real estate crowdfunding platforms.
An article in Les Echos questions if investors will have any recourse on failed projects while noting that the entire real estate sector has struggled with the online sector experiencing a similar decline as traditional markets but in a delayed manner.